Oracle’s growth prospects surge with focus on GenAI

Despite fourth-quarter revenue missing estimates, positive announcements strengthened its shares by 9%

Software and hardware giant Oracle seems to be on a strong rebound, poised for significant growth driven by the demand for training large language models. Despite missing analysts’ estimates in fourth-quarter revenue (which stood at $14.29 billion for the fiscal fourth quarter of 2024, up 3% from the year-ago period), the company managed to generate enough market interest to boost shares by 9% following some positive announcements.

During its Q4 2024 earnings call, the California-based company unveiled its largest sales contracts to date, fueled by the soaring interest in large language model training and unprecedented sales levels across OCI, Autonomous, Fusion, and NetSuite.

Safra Ada Catz, Oracle’s Chief Executive Officer, highlighted the company’s robust performance, stating, “RPO has surged to $98 billion, marking an $18 billion increase from Q3 and an impressive 44% year-over-year growth from $68 billion last year. We are transitioning from one-time nonrecurring license revenue to significant strategic customer commitments spanning multiyear cloud revenue, poised to accelerate our revenue growth rates. This strategic shift strengthens my confidence in our revenue, earnings, cash flow performance, and growth trajectory.”

This optimistic outlook is well-founded. Although Oracle faced challenges in the previous year, with its shares dropping over 10% due to lower-than-expected revenue in the first quarter and a below-estimate forecast for the second quarter amid uncertain tech spending, it has since made significant strides. In Q4 2024, Oracle’s U.S. dollar revenue growth rate reversed course, moving from negative one in fiscal year ’20 to a noteworthy plus eight this past year, excluding Cerner.

A recent partnership announcement between Oracle, Microsoft, and OpenAI further underscores Oracle’s growth potential. This collaboration aims to extend the Microsoft Azure AI platform to Oracle Cloud Infrastructure (OCI), enhancing capacity for OpenAI. Notably, Oracle’s more cost-effective cloud infrastructure compared to its competitors has attracted growing interest, especially among GenAI startups within enterprises.

In total, Oracle secured over 30 AI contracts worth more than $12 billion this quarter and nearly $17 billion this year. Many technology leaders and CIOs commend Oracle’s cost-effective suite of enterprise applications and infrastructure cloud technologies compared to other vendors. A banking CIO, speaking on the condition of anonymity, expressed admiration, stating, “They are certainly driving innovation in the cloud and AI arena, offering a plethora of exciting options and flexible deployment models.”

It appears that Oracle’s strategic efforts to expand capacity in existing cloud data centers and construct new ones to meet the rising demand for cloud services and GenAI applications are yielding significant returns.

Image by Freepik

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